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The U.S. Justice Department is now targeting major banks in an attempt to find fault in the present financial crisis plaguing the country. J.P. Morgan Chase & Co is the first to be investigated.

A new lawsuit filed in New York State Supreme Court this week attests that JP Morgan should be held responsible for the now widely known fraud associated with the current U.S. financial crisis. New York Attorney General Eric T. Schneiderman reports that this case specifically concerns fraud that it is related to packaging and sales of residential mortgage-backed financial securities sold as mortgage bonds to investors during the Bear Stearns & Co crisis of 2008. Indeed this case actually regards Bear Stearns but JP Morgan Chase must now bear the burden after their recent purchase of the failing investment bank.

The original complaint, then, alleges Bear Stearns & Co sold billions of dollars-worth of misrepresented securities during the two years preceding the 2008 crisis. The allegations include questions regarding the validity or quality of loan pools and how they presented information to investors, one of whom swears that he incurred losses of more than $22 billion. Despite the astronomical numbers, this particular lawsuit does not seek monetary damages in preference of restitution for lost investments.

According to Schneiderman’s complaint, the original party (Bear Stearns & Co) “kept investors in the dark about both the inadequacy of their review procedures and the defects in the underlying loans.” This is precisely the reason President Obama launched the task force at the beginning of the year, and why he appointed Schneiderman the chairman. Schneiderman’s job now is to oversee combined efforts from the FBI, the Securities Exchange Commission, and other agencies to investigate these allegations.

Joseph Evangelisti, JPMorgan spokesman, counters the allegation, claiming that the banking institution will contest the allegations. He cites that this lawsuit essentially reiterates previous allegations made in private legal cases that have already been judicially processed. He insists upon reminding that prior to the incidents in question Bear Stearns was once a powerhouse in the financial industry. He contends that the New York Attorney General rushed to pursue the litigation without developing a proper case and without providing the bank with an opportunity to defend the claims.

While many argue that the lawsuit is incomplete, Schneiderman (and thus the task force and, consequently, President Obama) has received much accolade for his efforts in remedying the matter. For example, George Washington University law professor Arthur Wilmarth Jr, who consulted for the Financial Crisis Inquiry Commission, says this lawsuit is:

a step in the right direction [because] there’s been a conspicuous lack of federal enforcement against most of the parties involved in the issuance of what turned out to be unsound (mortgage-backed financial products).

University of Missouri-Kansas City law professor, William K. Black, agrees that it is time to start finding responsibility. He says:

They are not prosecuting any elites from Wall Street, but they have taken the step of bringing, finally, a civil action.

While this indicates that the finding of “fault” may be a long ways off, holding someone responsible for the indiscretions could be nearing. Of course, since Black has been an aggressive regulator of the savings and loan industry after the 1980s crisis, it is easy to see understand his viewpoint. His experience leads him to ensure that the filing of the motion through the New York State Attorney General’s office makes the most sense because of the Martin Act. This is a New York state-specific law that more easily enables the attorney general to prosecute cases of fraud without having to demonstrate the defendant’s intentions.